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• Republic of the Philippine:i


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SECURITIES AND EXCHANGECOMMISSION
SEC Bldg. EDSA, Greenhills, Mandaluyong City

OFFICE OF THE GENERAL COUNSEL

17 December 2010

SEC-OGC Opinion No. 10-33


Re: Securities; Exemption From
Section 8 of the Securities
Regulation Code

Mr. Teodoro G. Rolluqui


President
Pinoy Migrant Workers Holdings Corporation
707-5 Sta. Ana Street, Plainview
Mandaluyong City, Metro Manila

Sir:
This refers to your query dated 14 May 2008 on whether or not Pinoy Migrant
Workers Holdings Corporation ("PMWHC") should register its securities with the
Commission as required by Section 8 of the Securities Regulation Code C'SRC,').l As
you have written, the Commission's reply will be your reference "regarding the sale
or issuance of stock certificates to existing incorporators and new investors whether
at price of par value or above."

PMWHC was incorporated on 18 January 2008, with Registration No.


CS200800580. Its primary purpose is:

"To acquire, hold, sell, exchange, deal and invest in the stocks, bonds, or
securities of any government or any subdivision thereof or any public or
private corporation .. and in real or personal property of all kinds in the same
manner and to the same extent as natural person, might could or would do,
to exercise all the rights, powers and priviledges [sic] or ownership, including
the right to vote therein, or consent in respect thereof, for any and all
purposes without however managing securities, portfolio or funds of the
managed entity or firm nor the corporation shall act as stock broker or dealer
in securities.,,2

The authorized capital stock of PMWHC is four million two hundred thousand
pesos'(Php 4.2M), divided into forty two thousand (42,000) common shares with a
par value of one hundred pesos (Php 100.00) per share.

1 Republic Act 8799 (2000).


2 Reproduced as it appears in the Articles of Incorporation of PMWHC.
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The PMWHC stock certificates are "securities" within the meaning of S~ctjon
3.1 of the SRC, which reads:
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"SEC. 3. Definition of Terms. -

3.1."Securities' are shares, participation or interests in a corporation


or in a commerdal enterprise or profit-making venture and
evidenced by a certificate, contract, instrument, whether written or
electronic in character. It includes:

a) Shares of stock, bonds, debentures, notes, evidences of


indebtedness, asset-backed securities;"

xxX' (Emphasis supplied)

In general, Section 8 of the SRC requires the registration of securities:

"SEC. 8. Requirement of Registration of Securities. 8.1. Securities shall not


be sold or offered' for sale or distribution within the Philippines, without a
registration statement duly filed with and approved by the Commission. Prior
to such sale, information on the securities, in such form and with such
substance as the Commission may prescribe, shall be made available to each
prospective purchaser.

xxx"

But there are securities exempt from registration:

"SEC. 9. Exempt Securities. 9.1. The requirement of registration under Subsection


8.1 shall not as a general rule apply to any of the following classes of securities:

a) Any security issued or guaranteed by the Government of the Philippines,


or by any political subdivision or agency thereof, or by any person controlled
or supervised by, and acting as an instrumentality of said Government.

b) Any security issued or guaranteed by the government of any country with


which the Philippines maintains diplomatic relations, or by any state, province
or political subdivision thereof on the basis of reciprodty: Provided, That the
Commission may require compliance with the form and content of disdosures
the Commission may prescribe.

c) Certificates issued by a receiver or by a trustee in bankruptcy duly


approved by the pr6per adjudicatory body.

d) Any security or its derivatives the sale or transfer of which, by law, is


under the supervision and regulation of the Office of the Insurance
Commission, Housing and Land Use Regulatory Board, or the Bureau of
Internal Revenue.

e) Any security issued by a bank except its own shares of stock.


,
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xxx"

In view of the foregoing, it appears that the PMWHC stock certificates are not
exempt securities. Nevertheless, the SRC proviqes for exempt transactions in which
case the requirement of registration under subsection 8.1 of the SRC does not
apply:

"SEC. 10. Exempt; Transactions. 10.1. The requirement of registration under


Subsection 8.1 shall not apply to the sale of any security in any of the
following transactio~s:

a) At any judidal sale, or sale by an executor, administrator, guardian or


receiver or trustee in insolvency or bankruptcy.

b) By or for the account of a pledge holder, or mortgagee or any other similar


lien holder selling or offering for sale or delivery in the ordinary course of
business and not for the purpose of avoiding the provisions of this Code, to
liquidate a bona fide debt, a security pledged in good faith as security for such
debt.

c) An isolated transaction in which any security is sold, offered for sale,


subscription or delivery by the owner thereof, or by his representative for the
owner's account, such sale or offer for sale, subscription or delivery not being
made in the course;of repeated and successive transactions of a like character
by such owner, or 6n his account by such representative and such owner or
representative not tieing the underwriter of such security.

d) The distribution by a corporation, actively engaged in the business


authorized by its articles of incorporation, of securities to its stockholders or
other security holders as a stock dividend or other distribution out of surplus.

e) The sale of capital stock of a corporatioo to its own stockholders


exclusively, where no commission or other remuneration is paid or given
directly or indirectly in connection with the sale of such capital stock.

f) The issuance of bonds or notes secured by mortgage upon real estate or


tangible personal property, where the entire mortgage together with all the
bonds or notes secured thereby are sold to a single purchaser at a single sale.

g) The issue and delivery of any security in exchange for any other security
of the same issuer pursuant to a right of conversion entitling the holder of the
security surrendered in exchange to make such oonversion: Provided, That the
security so surrendered has been registered under this Code or was, when
sold, exempt from the provisions of this Code, and that the security issued
and delivered in exchange, if sold at the conversion price, would at the time of
such conversion fall; within the class of securities entitled to registration under
this Code. Upon such conversion the par value of the security surrendered in
such exchange shall be deemed the price at which the securities issued and
delivered in such exchange are sold.
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h) Broker's transactions, executed upon customer's orders, on any registered
Exchange or other trading market.

i) Subscriptions for shares of the capital stock of a corporation prior to the


incorporation thereof or in pursuance of an increase in its authorized capital
stock under the Corporation Code, when no expense is incurred, or no
commission, compensation or remuneration is paid or given in connection with
the sale or disposition of such securities, and only when the purpose for
soliciting, giving or taking of such subscriptions is to comply with the
requirements of such law as to the percentage of the capital stock of a
corporation which should be subscribed before it can be registered and duly
incorporated, or its authorized capital increased.
!

j) The exchange of securities by the issuer with its existing security holders
exclusively, where no commission or other remuneration is paid or given
directly or indirectly for soliciting such exchange.

k) The sale of securities by an issuer to fewer than twenty (20) persons in


the Philippines during any twelve-month period.

I) The sale of securities to any number of the following qualified buyers:

(i) Bank;

(ii) Registered investment house;

(iii) Insurance company;


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(iv) Pension fund or retirement plan maintained by the Government


of the Philippines or any political subdivision thereof or managed
by a bank or other persons authorized by the Bangko Sentra/ to
engageiin trust functions;
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(v) Investment company; or
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(vi) Such other person as the Commission may by rule determine as


qualified buyers, on the basis of such factors as financial
sophisticatiqn, net worth, knowledge, and experience in financial
and business matters, or amount of assets under management.

In addition to the enumeration of qualified buyers under Section 10.1(1)


above, any sale or offer for sale or distribution of securities to qualified buyers4 as

4 SECTION 1. A "qualified individual buyer" shall be a natural person who, at the time of his or her
registration with a Self Regulatory Organization, or such other entities that the Commission may
authorize to make the registration, possessesthe following qualifications:
a) Has a minimum annual gro;:;sincome of Twenty Five Million Pesos (PhP25,OOO,OOO) for at least two
years prior to registration; ora total portfolio investment in securities registered with the Commission
of at least Ten Million Pesos (PhPIO,OOO,OOO)i or a personal net worth of not less than Thirty Million
Pesos (PhP30,OOO,OOO);
AND
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defined in the Commission's Memorandum Circular NO.6, Series of 2007 shall
likewise be exempt from the registration requirements of the SRC.5

Thus, if PMWHC engages in the sale of its stock certificates in any manner,
which is in the nature of transactions enumerated above, there will be no need to
register the PMWHCstock certificates with the Commission.

In sum, before PMWHC issues or sells its shares of stock, it should comply
with the registration requirements of Section 8 of the SRC, unless said sale or
issuance thereof is an exempt transaction under Section 10 of the SRCexcept Sec.
10.1 (i) of the SRC which needs registration of the securities if such subscription
entails expenses. Note however, that notice of exemption on SEC Form 10-1 is
required in an offering or distribution of securities under Section 10.1 (k) and (1) of
the SRC.6

It shall be understood that the foregoing opinion is rendered based solely on


the facts and circumstances disclosed and relevant solely to the particular issues
raised therein and shall not be used in the nature ofa standing rule binding upon
the Commission in other cases whether of similar or dissimilar circumstances. If,
upon investigation, it will be disclosed that the facts relied upon are different; this
opinion shall be rendered null and void.

Please be guided accordingly.

Very truly yours,

~~
VERNETTE G. UMALI-PACO
General Counsel '

b) Has been engaged in securities trading, in his personal capacity or through a fund manager, for a
period of one year; or held for at least two years a position of responsibility in any professional or
business entity that requires knowledge or expertise in securities trading, such as, legal consultant;
financial adviser; sales perso? or associated person of a broker-dealer; or finance, treasury or trust
officer of a bank or other exetutive positions with related responsibilities.
SECTION 2. A juridical person shall be considered a "qualified institutional buyer" if it possesses any
of the following qualifications at the time of its registration in the same manner described above:
a) Has a minimum annual gross income of at least One Hundred Million Pesos (PhPl00,000,000) for
at least two years prior to registration;
b) A total portfolio investment in securities registered with the Commission of at least Sixty Million
Pesos (PhP60,000,000);
c) A net worth of not less than One Hundred Million (PhplOO,OOO,OOO).
5 Memorandum dated 22 September 2008 of Director Justina F. callangan of the Corporation
Finance Department to the Office of the General Counsel of the Commission.
6 Amended Implementing Rules and Regulations of the SRC, Rule 10.1.